newsletter 07 11 final - vkontrole.lt news_07_11.pdf · this first newsletter. and even more...
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Municipality Audit
E U R S A IT A S K F O R C E
To continuously monitor the changes in the whole public
sector, uniting the best practice of municipality audit we
took the first steps of the EUROSAI TFMA.
We are partners aiming for the collective success and
seeking to implement the vision of our Task Force – to
become an active EUROSAI Task Force covering
relevant questions in the sphere of audit ing
municipalities – as well as our Mission: to create an
open platform for sharing the best practice and
experience on the municipality audit.
Members of our Task Force – Supreme Audit
Institutions of 27 European countries - agreed on the
guiding principles and objectives that the Task Force will
pursue while developing the platform for sharing of the
best practice and experience in municipality audits.
Each member of TFMA contributed in different ways to
its first activities: organisation of seminars and
meetings, delivery of presentations, taking part in
discussions, conducting surveys, analysing methods
and methodology applied in municipality audits,
involving in forums and, of course, sharing experience in
this first newsletter. And even more importantly, all
members are vital to the future achievements of the TF.
Your support has been and remains invaluable for us.
TFMA EVENTS
TFMA ACTIVITIES
FROM THE MEMBERS
Kick of Meeting on page 3
st1 seminar of EUROSAI TFMA on page 4
st1 annual meeting of EUROSAI TFMA members on page 5
Upcoming events on page 7
TFMA implements activities under strategic goals from the Working Programme 2017-2020
The webpage
The forum
Communication with stakeholders
The value of municipality audit
Audit results
Articleson page 29
on page 15
on page 10
on page 8
TFMA COMMUNICATION on page 9
CHANNELS
Municipality Audit
E U R S A IT A S K F O R C E
Task Force on Municipality Audit Kick off Meeting11 - 12 April, 2017 Vilnius
THE KICK OF MEETING
11-12
April 2017
in Vilnius
The first official gathering of the established TFMA was the Kick-off Meeting
held on 11-12 April 2017 in Vilnius, Lithuania. TFMA members shared
responsibilities from the Working Programme 2017-2020 as well as
presented the planned schedules of their activities under the strategic goals
of TFMA:
� Exchanging the best practice and experience to reach audit results that have a substantial impact on
improving public financial management.
� Making the external municipal auditing system more efficient.
� Encouraging cooperative audits.
Possible topics for cooperative audits were generated and identified for further consideration among TFMA
members. Each member contributed to the identification of the working principles during the special session.
It was agreed that only being resourceful and inventive, fully engaged and involved, showing respect for
personal and team considerations, striving for novelty and innovation can substantially contribute to the
smooth achievement of the strategic goals and make the process fluent and efficient.
TFMA EVENTS TFMA NEWS APRIL 2017 – JUNE 2018, NO.1 3
STTHE 1 SEMINAROF EUROSAI TFMA “The added value from
supreme audit institution
audits, conducted in local
municipalities”
5-6 October, 2017 the Seminar on Municipality
Audit “The Added value from Supreme Audit
I n s t i t u t i o n a u d i t s , c o n d u c t e d i n l o c a l
muni-cipalities” took place in Riga, Latvia. The
Seminar was hosted by the State Audit Office
of Latvia.
The purpose of the seminar was to exchange practices and
elaborate ideas on the possible indirect added value of audit
results – the ‘further-sharing’ and further use of audit results
in the form of training, discussion papers, research activities,
etc. Moreover, the seminar provided a platform for sharing
experiences on development planning systems in
municipalities and the possibility to use development planning
documents for assessing compliance and performance
issues.
The seminar was attended not
o n l y b y T F M A m e m b e r
c o u n t r i e s , b u t a l s o b y
representat ives of European
O r g a n i z a t i o n o f R e g i o n a l
External Public Finance Audit
Institutions (EURORAI) and the
Swedish Association of Local
A u t h o r i t i e s a n d R e g i o n s
(SALAR), who presented audit
a n d a c c o u n t a b i l i t y i n l o c a l
government.
All information about the seminar can be found on www.vkontrole.lt/tf/page.aspx?id=50
TFMA EVENTS TFMA NEWS APRIL 2017 – JUNE 2018, NO.1 4
st6 October, 2017 also the 1 annual meeting of the EUROSAI TFMA members took place in Riga, Latvia. During
the meeting, three main issues were discussed:
� The progress of all activities under each strategic goal.
� The most important actions that must be completed until the end of 2017.
� Activities for 2018.
The Annual Meeting aimed at discussing the progress of implementation of current activities. During the
meeting, it was also agreed on short-term engagements and activities in 2018.
STTHE 1 ANNUAL MEETING OF THE EUROSAI TFMA
TFMA EVENTS TFMA NEWS APRIL 2017 – JUNE 2018, NO.1 5
QUICK FACTS about TFMA events
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30
2
14
participants
presentations
workshop
sessions
Panel
of experts
EURORAIrepresentatives
SALAR representatives countries
TFMA EVENTS TFMA NEWS APRIL 2017 – JUNE 2018, NO.1 6
Municipality Audit
E U R S A IT A S K F O R C E
5-6
November
2018
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UPCOMING EVENTS
TFMA EVENTS 7
State Audit Institution of the Republic of Serbia has kindly suggested
to host the next Seminar on Municipality Audit in Belgrade, Serbia.
The agreed date for the Seminar is 5-6 November 2018.
The main topic of the seminar will be
As an immensely broad issue related with sustainable
development of local and general government it is something that ndauditors come across in many audits. The aim of the 2 seminar on
Municipality Audit is to cover the topic from different perspectives.
The annual meeting of the EUROSAI TFMA members will also be
organized along the Seminar on Municipality Audit in Belgrade to
discuss the progress of implementation of activities of the EUROSAI
TFMA Working Programme 2017-2020 activities, possibilities to start
new activities as well as other TFMA affairs.
“LOCAL GOVERNMENT FINANCE:
FUTURE CHALLENGES”
TFMA NEWS APRIL 2017 – JUNE 2018, NO.1
To gather and systemize the
information about the models
of external audit systems of
municipalities in TFMA countries, the
related activity was initiated by the
SAI of Lithuania. The Coordination
Group was formed composed of
members of EUROSAI TFMA who
expressed their desire to participate
in this activity.
It consists of SAIs of Lithuania (team
leader), Estonia as well as Greece.
Information gathered about external
a u d i t i n g s y s t e m s o f l o c a l
government in different countries and
further analysis will allow to identify
strengths of various models, reveal
and share good practice examples
and initiate positive changes for the
whole municipality audit system.
During the last period the content for
o v e r v i e w ( c o m p r e h e n s i v e
questionnaire) was prepared and
discussed among EUROSAI TFMA
members in EUROSAI TFMA Annual
Meeting. After the meeting the
content for the overview as well as
example of prepared overview of
L i thuan ia was spread among
members.
To ensure the municipalities’ data are as accurate as possible as well as to
encourage the secondary use of the data representatives of SAI of
Austria initiated an activity aiming to provide a summary of the
differences in the structure and aggregation level of data in EUROSAI countries
as well as to identify best practice models in the field of quality assurance and
data collection.
During the last period a questionnaire was prepared and discussed among
EUROSAI TFMA members in EUROSAI TFMA Annual Meeting.
After the meeting the questionnaire was circulated and in mid February 2018
responses from almost all EUROSAI TFMA members were collected while the
deadline was the end of February.
At the moment representatives of
SAI of Austria are starting to
analyze the information gathered,
and it is expected that results of
the survey will be published by the
end of March 2019. Also it is
planned to prepare and distribute
the information for peer learning.
The Coordination Group have
prepared the final questionnaire for
the survey about methodologies
u s e d i n d i f f e r e n t E U R O S A I
members SAIs and an online tool
for conducting the survey is ready.
At the moment EUROSAI TFMA
members are fi l l ing out the
questionnaire.
To identify areas where recommendations and guidelines on
municipality audit could be useful the related activity has been
launched. The Coordination Group was formed composed of members
of EUROSAI TFMA who expressed their desire to participate in this activity. It
consists of SAIs of Croatia, Latvia as well as Romania.
The Coordination Group has already reviewed if there are any existing
materials related to the topic.
It is planned to have survey results by the end of the July 2018, and to publish
results of the activity by the end of 2018: common practice existing in SAIs of
EUROSAI TFMA, good practice examples as well as a list of areas where the
recommendations and guidelines on municipality audit could be useful.
At the moment the Coordination
Group rev iews in format ion
provided by TFMA members and it
is p lanned that the overa l l
overview of external municipal
audit models in TFMA countries
will be prepared by the end of
September 2018. Later on, it is
planned to continue the analysis
of the external audit systems: the
different models will be compared,
strengths and weaknesses will be
identified.
ANALYSIS OF THE EXTERNAL AUDIT SYSTEMS
MUNICIPALITY DATA USE IN AUDITS OF MUNICIPALITIES
METHODOLOGIES USED IN MUNICIPALITY AUDITS
TFMA ACTIVITIES TFMA NEWS APRIL 2017 – JUNE 2018, NO.1 8
One of EUROSAI TFMA strategic goals is to
encourage cooperative audits and conduct
them if such a need would be identified
among EUROSAI TFMA members. The first
step in this area has already been taken
during the Kick-off meeting – audit areas
(and particular topics) most relevant for
conducting cooperative audits were
identified as well as arguments for and
against conducting audits in such topics.
One of the most relevant topics among
EUROSAI TFMA members “Effectiveness of
the use of EU funds” was developed into
"Responsibility of Local Governments’
Capital Investments" taking into account
that not all EUROSAI TFMA members are
members of EU and presented during the
1st Annual Meeting. Representatives of
SAIs had possibility to consider and inform
about preliminary decision, if they are
interested in par t ic ipat ing in such
cooperative audit. It is planned to have final
decision of EUROSAI TFMA whether to
conduct this audit or not up to the end of
2018. In parallel, EUROSAI EUROSAI TFMA
members are being encourage to initiate
other topics for possible cooperative audits.
To gather and systemize the information about municipalities own revenues in
countries the related activity was initiated by the Former Yugoslav Respublic of
Macedonia. Issues point of interest for implementation of the activity: jurisdiction
on auditing the local governments, the financing of municipalities, types of
revenues administered by municipalities (taxes, fees, etc.), the authority of
determining the level of revenue (central/local government), participation of own
revenue in total revenue.
To gather the information about the main
municipal data/expenses and to develop
database was initiated by the SAI of
Slovakia. Issues point of the activity is to
facilitate comparison and use data in
summary reports from municipality audits.
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SAI of the Former Yugoslav
Republic of Macedonia at the
m o m e n t a r e p r e p a r i n g a
questionnaire. Next step will be
conducting the survey among all
EUROSAI member SAIs.
ANALYSIS OF MUNICIPALITIES OWN REVEUES
DATABASE ABOUT THE MAIN MUNICIPAL DATA/EXPENSES
SAI of Slovakia have prepared the draft
questionnaire for EUROSAI TFMA
members. Members send comments or
suggestions to the draft questionnaire
and survey about data availability. Next
step wil l be data gathering from
EUROSAI TFMA members.
PROMOTION OF COOPERATIVE AUDITS
EUROSAI TFMA COMMUNICATION CHANNELS
COMMUNICATION WITH EURORAI
To make a share of information more agile the forum was launched for
TFMA members and others who are interested in municipality audit
( ).This platform of communication https://www.vkontrole.lt/tf/forum
enables an ad hoc sharing of experience and good practice on a needs
basis. The forum has been already tested – members discussed the
development planning systems for local municipalities in their countries
when preparing for the municipality audit seminar held in Riga. At the
moment, EUROSAI TFMA members share their institution plans for 2018
– what audits will be conducted in the near future in the field of local
government.
To better and more efficiently share knowledge and information among
members as well as externally the EUROSAI TFMA webpage was created
( ) and is now administrated by EUROSAI TFMA http://www.vkontrole.lt/tf/
Secretariat.
EUROSAI TFMA members gathered a lot of relevant information and now
the webpage among other things, etc. includes publications, surveys,
general information about municipalities.
This enables interested parties to find materials on municipality audit as
well as on international practices in one place. The database which
includes audit summaries, audit reports or press releases on
municipality audits is not actively updated since 2018. We highly
encourage all European SAIs to upload their audits at the EUROSAI
database of audits.
Furthermore, EUROSAI TFMA webpage contains all material from
seminars on municipality audit, including presentations, materials of
workshops, some videos of presentations, etc.
TFMA NEWS APRIL 2017 – JUNE 2018, NO.1 9TFMA ACTIVITIES
EUROSAI TFMA initiated and started cooperation with the European
Organization of Regional External Public Finance Audit Institutions
(EURORAI) in 2017. Representatives from EURORAI were invited and
attended the Seminar on Municipality Audit “The Added value from
Supreme Audit Institution audits, conducted in local municipalities” on 5-
6 October, 2017.
After the Seminar, the bilateral meeting was organized on 6 October,
2017, and it was agreed with EURORAI members to cooperate in
EUROSAI TFMA activity related to external audit systems of
municipalities.
It is planned to cooperate with EURORAI in implementing EUROSAI
TFMA activity related to external audit systems of municipalities in 2018
– EURORAI will contribute in preparing the overviews.
Moreover, EUROSAI TFMA members were invited to the EURORAI
seminar “Audit of companies owned by local governments”, which will be
organized together with SAI of Hungary and will be held on 18-19 October
2018, in Hungary.
Audit methodology in local government
The Albanian Supreme Audit Institution is continuing
with the consolidation of the institutional reform on the
path towards institutional progress and modernization
in reflecting EU requirements and best practices –
Acquis Communitaire, the implementation of an
ambitious and contemporary institutional development
platform referring to the dimensions of well-functioning
and the performance of ALSAI's performance subject to
good governance and public accountability.
ALSAI auditing aims the compliance with ISSAI
Standards and best international practices embraced in
ALSAI`s Strategic Plan 2013-2017 and in the Annual
Plan.
We have developed our audit also according to the
orientations of the Congress XXII of INTOSAI held in Abu
Dhabi. Referring to the requirements of Law No.
154/2014 “On the Organization and Functioning of the
Albanian Supreme State Audit”, drafted pursuant to
articles 81, 83, item 1, and 162 up to 165 of the
Constitution, the competences and scope of work are
defined in Article 10 “Competences”, related with:
a) audit of budget implementat ion by the
governmental units, including the annual budget
accounts;
b) audit of public revenue collection;
c) auditing the use, administration and protection of
public funds and public or state property by general
governmental units;
d) auditing the annual financial statements of
governmental units and providing an audit opinion;
e) auditing the public sector internal audit systems;
f) auditing the users of public funds, provided by the
European Union or other international organizations,
unless otherwise stated in a special law;
g) auditing the use, administration of funds and public
or state property and protecting the economic and
financial interests of the State in companies, in which
the State has more than half of the shares or when the
borrowings, loans and their obligations are
guaranteed by the State;
h) auditing, for the purpose of protecting public
interests, activities or sectors regulated by
concession contracts;
I) auditing of political parties, public entities or
associations for funds allocated to them by the State
Budget;
j) auditing other entities, as defined in specific laws.
There are four types of audits performed on ALSAI:
compliance performance
financial and IT
The Manuals have been drafted based on ISSAIs,
determination of priorities and drafting of the
International Standards Implementation Strategy ISSAI
2015-2016, in the requirements of IDI INTOSAI
Guidelines, ISSAIs, and Best Practices in the Field
(European Court of Auditors Manual).
According to the type of audits we determine whether
the reported results and financial situation of the
auditee, as well as the use of the resources are
presented accurately and in accordance with the rules of
financial reporting.
In compliance audits, we determine whether the
revenues and expenditures have been in accordance
with the law of the State Budget, with the relevant legal
and sub-legal acts and with the principles of the law on
financial management and control, or whether the
general principles of the public sector financial
management system and the behavior of public sector
officials are applied.
In performance audits, we assess whether the
programs, organization of work and processes,
activities and management systems of public sector
entities operate in accordance with the principles of
economy, efficiency and effectiveness.
In IT audits, we gather and evaluate the evidence so as to
determine whether a computer system protects assets,
maintains data integrity, allows audited entity targets to
be effectively accessed and uses resources efficiently.
For 2016 the ALSAI audits according to institutions are
represented below:
On the Municipalities and also for Central Government
the main difficulty on financial audit is found the lack of a
unified accounting basis, the different addressing of
responsibilities for the preparation of the Government
Consolidated Financial Statements. The absence of
consolidated state statements affects not only the level
of transparency, but is closely related with careful
monitoring of public finances and analysis of
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37
51
14
20
7
6
106
0 20 40 60 80 100 120
Ministries and Central institution
Local government institutions and other units
at local level
Directories and branches of taxation and
customs
Financial institutions and state venture capital
companies
Units and projects with foreing investment
Environmental protection entities
Institutions where are developed 13
performance audits (central and local)
Audits according to auditees
macroeconomic indicators. We have asked for
measures to be taken to create a directory, specifically
for accounting and financial reporting, which deals with
the design and implementation of the necessary
methodologies for Public Accounting and Financial
Reporting. Only regulatory legal framework ordinance
for Ministry of Finance exist. Based on this uncompleted
regulatory ordinances we have continued giving an
opinion related to the financial statements prepared by
public sector even this year, despite the fact that this
auditing has not managed to achieve a satisfying
coverage, but is only realized in some institutions,
occupying only 5% of concluded audits.
The actual realization of Regional Development Fund,
which is related to the fund used by the line ministries for
the implementation of projects, is not easily identifiable
in the financial system of the government, because
these funds are included in "Investments", but are
unrelated to a corresponding code and the Ministry of
Finance does not have information about funds actually
used by local governments for the implementation of
projects financed by the RDF. The full value of this
realization is in the Technical Secretariats of Ministries
in the General Secretariat of the Regional Development
Committee in the Prime Minister. As a result, in the
budget report is absent a transparent reflection of the
Regional Development Fund, constituting a high risk for
public finances in the lack of transparency of its
reporting. We have recommended that the Ministry of
Finance, in its Instruction on the annual budget
implementation, in a separate section, must define a
clear criterion for the allocation of funds for the RDF and
must clearly define the manner of their inheritance after
the close of the budget year. Further on, it must establish
written rules, like authentic acts in the year-end for the
value of the fund that will run out of the normal budget
cycle, in order to create a standardized process for the
implementation of the RDF.
Performance audits are conducted over municipalities.
Performance Audit approach is an independent review
of the efficiency and effectiveness of its government
ventures, programs and organizations, with a particular
focus on economy and aiming to improve. Main
municipalities’ performance audit findings are the lack
of efficient use of grants, misuse of public funds
pursuance and Human Resources mismanagement.
The urban waste management in our country is
decentralized. In most cities, the waste collection and
transportation service is carried out by private waste
management companies, which are contracted by the
Municipalities.
Rural areas are not yet covered by waste management
services. Much of the remains of these areas are
deposited in rivers or roads, which are “cleaned” by the
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NEWS FROM MEMBERS TFMA NEWS APRIL 2017 – JUNE 2018, NO.1 11
waters and thus relocated to other parts of the land, in
waterways and finally ends in coastal areas. Municipal
waste has a high percentage of organic waste and there
is no recycling method to reduce the amount of organic
waste disposed of on landfills.
In this transitional phase, the key role in informing
citizens about the way, ways, forms and times of quality
services are played by municipal employees and
ineffective and efficient staff management directly
affects citizens in receiving services or investment in the
community such as the result of inadequate human
resources, the failure of the municipal system in terms of
orientation, responsibilities and competences at
different levels of decision making and nodes that
provide services directly to the citizen.
Challenges of auditing activity
It is as important as human resources to provide as
many quality and timely services to citizens as there is
also the role that human resources play in managing
taxation of citizens that should be turned into quality
investments for the community.
From formal and informal media reports, it results that
the citizens-municipality relationship varies through an
unc lear, fo rmal ly apparent chaos regard ing
communication, information and transparency, which
are directly related to professional capacities and the
quality of human resources of the municipality. Also,
there is a constant concern of the community in terms of
managing their taxes in terms of infrastructure
investments that the citizen faces in everyday life.
On this purpose the main performance message was
“lack of investment in NJMBNJ to increase the
institutional and professional capacities of these
structures as well as the poor performance of the human
resource activity monitoring systems in the respective
administrations and in relation to the community have
negatively impacted the achievement of the goal of the
territorial-administrative reform, through 2015-2020,
for the consolidation of a bureaucratised, impartial,
politically, professionally and transparently local
administration”
ALSAI will continue to carry out audits in compliance
with the constitutional and legal framework based on
the principles of independence, integrity, objectivity,
accountability, public interest, professionalism,
cooperation and transparency. Our main objective is to
contribute in good governance, through a preventive and
uncompromising fight against corruption and abuse of
public property, increasing thus the public confidence
and promoting the use of public funds with economy,
efficiency and effectiveness.
The Republic of Croatia consists of 576 local and
regional self-government units (hereinafter: local units),
out of whom 20 with the status of regional self-
government unit (county), 127 with the status of a city
and 428 with the status of a municipality. The capital city
of Zagreb has the authority and legal status of both a
county and a city.
Total revenues and receipts of all 576 local units for the
2015 budget year amounted to 3.031.457.181,00 EUR
while expenses and expenditures amounted to
3.011.001.398,00 EUR respectively.
Number of auditees (local units) is determined by Annual
Plan and Program of the State Audit Office. Auditees are
based on risk assessment considering following criteria:
financial significance, expressed opinion in previous
audit and other information on local units operations.
For this reporting period (2016), the State Audit Office
has carried out financial audits of 64 local units: 20
counties, 32 cities and 12 municipalities. Revenues and
receipts of local uni ts audited amounted to
2.067.390.335,00 EUR and represented 68.2 % of total
revenues and receipts of all local units. Expenses and
expenditures of local units audited amounted to
2.064.127.687 EUR represented 68.6 % of total expenses
and expenditures of all local units.
Table 1 below shows data on number of local units
audited, as well as opinion expressed for above
mentioned audit period.
Table 1. Number of local units audited and opinion expressed
for local units audited in 2016
During the course of a financial audit of local units, the
State Audit Office has determined irregularities and
omissions with reference to budget (planning and
implementation), accounting and financial reporting,
revenues and receivables, expenditures and liabilities,
public procurement and asset management.
Irregularities and omissions determined, local units can
obviate by setting up more efficient internal control
system and by operating in compliance with the
legislative.
At the end of the course of audit, local unites are obliged
to set up the implementation plan for follow up of orders
and/or recommendations given. This plan consists of
determined deadlines, activit ies and persons
responsible for implementation of given orders and
recommendations. Local unites submit these plan to the
State Audit Office. The State Audit Office take monitoring
activities (follow up) on implementation of orders and/or
recommendations given.
T h e n u m b e r o f i m p l e m e n t e d o r d e r s a n d
recommendations increased in last years, e.g. the
n u m b e r o f n o t i m p l e m e n t e d o r d e r s a n d
recommendations decreased, although significant
number of irregularities and omissions repeated during
the period of many years.
The State Audit Office, beside financial audits, carried
out performance audits of all 576 local units in last few
years. Topics of these audits are related to asset
management, waste management, maintenance of
publ ic roads owned by local units , revenues
management and entrepreneurial zones in local units.
Full text of the Annual Report of the State Audit Office of
the Republic of Croatia for 2016 is available at: http://www.revizija.hr/datastore/filestore/85/izvjesce_o_radu_za
_2016.pdf.
Local Unit Expressed opinion
TypeAudit
edUnqualied Qualied
County 20 14 6
City 32 12 20
Municipality 12 1 11
Total 64 27 37
The Former Yugoslav Republic of Macedonia has 80
municipalities and the City of Skopje as a separate local
self-government unit (LSGU). All municipalities have
equal competences regardless of the fiscal capacity,
population number and territory i.e. whether they are
urban or rural municipality. The City of Skopje as a
separate LSGU consists of 10 municipalities and its
operation is regulated by a separate Law on the City of
Skopje.
The State Audit Office (SAO) performs external audit i.e.
regularity and performance audit in the municipalities,
as well as in the public enterprises established by the
municipalities and the City of Skopje. Regularity audit
covers audit of financial statements together with
compliance audit and the independent auditor
expresses two opinions - on the fairness and objectivity
of financial and compliance with laws and regulations of
financial transactions reflected in financial statements.
In addition to the regularity audits, in 2017 SAO
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Local units in Croatia
Municipality audit in the Former Yugoslav Republic of Macedonia
NEWS FROM MEMBERS TFMA NEWS APRIL 2017 – JUNE 2018, NO.1 12
performed compliance audit on the topic "Taking on
financial obligations and financial instability in
municipalities", as well as performance audits on "Public
private partnership at local level" and "LSGUs
effectiveness in annual planning and realization of
annual public procurement plans".
Local se l f -government un i ts car r y out the i r
competences and everyday activit ies through
realization of numerous projects. The projects arise
from different spheres of action of LSGUs: urbanism,
utilities, local economic development, education, social
security, culture, sport, etc. For realization of these
responsibilities, aside from municipality own revenue,
loans, donations and IPA funds, LSGUs have the legal
option to form public-private partnerships.
Public-private partnership (PPP) is a medium-term and
often long-term cooperation between the public and
private sector, whereby combining the experience and
competences of both sectors contributes to more
successful solving of problems at national, regional and
local level.
The partnerships of these two sectors are guided by the
fact that better results are achieved through joint
cooperation, rather than individually. The cost-
effectiveness of public-private partnership compared to
the traditional provision of public goods and services
results from quality-designed project solution, financial
structure and joint project management.
With the audit we identified the number of PPP contracts
signed at local level per different areas, as shown in the
following pie chart.
For overcoming identified shortcomings in the audited
area, we made recommendations to several competent
entities in the Government of the Former Yugoslav
Republic of Macedonia, the Ministry of Economy and the
municipalities. The recommendations made to the
Government read as follows:
� to analyze the existing Law on concessions and
public-private partnership with experts in the field of
public-private partnership, and to consider the
possibility of setting up a competent institution/body
with rights, competencies and obligations for all
phases of project implementation;
� to revise the above Law in terms of delimitation
between concessions and public-private partnership
and defining procedures conditional on the project
value;
� to adopt Strategy on concessions and public-private
partnership;
� PPP Council to start operating as foreseen by the
above Law.
For the Ministry of Economy, as the competent authority
for public-private partnership, audit recommendations
referred to the following:
� to strengthen its own administrative capacity and
hence to ensure effective implementation of the Law
on concessions and public-private partnership;
� to update regularly the Register of awarded contracts
for establishing public-private partnership;
� to organize regular and occasional trainings for
developing public and private sectors’ capacities for
raising awareness and informing on the concepts,
policies and procedures necessary for realization of
PPP projects.
Audit recommendations for the municipalities referred
to adherence to the provisions of contracts between the
private and the public partner (the municipality).
Considering municipalities’ many competences, as well
as the large number of upcoming capital projects,
LSGUs should use the possibility to realize as many as
possible projects with public-private partnerships, and
thus contribute to local economic development,
increase of employment, better fiscal capacity of
municipality budget, greater sustainability, efficiency
and quality of public services.
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Number of contracts per area
Administration biuldings
Kindergarden
Public lighting
Sport facilities
Waste management
Parking lot
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Short essay about Montenegro
The Constitution of Montenegro guarantees the right to
local self-government, the manner of decision-making,
form, ownership powers, financing and autonomy of the
local self-government.
Territorial organization of local self-government units
is regulated by the Law on Territorial Organization and
includes 25 local self-government units (LSGU): the
Capital city of Podgorica, the Old Royal Capital Cetinje,
22 municipalities and the municipality within the Capital
city (Golubovci municipality).
Local self-government is exercised in in the municipality,
in the municipality within the Capital city, the Old Royal
Capital in accordance with the Law on Local Self-
Government, except for the specific issues regulated by
the Law on the Capital and the Law on the Old Royal
Capital.
Municipal authorities are the Municipal Assembly and
the president (in the Capital and the Old Royal Capital -
Mayor).
The Assembly consists of councilors elected by citizens
for a period of four years. The Assembly is the
representative body of citizens and its work is regulated
by the Law on Local Self-Government and the Statute of
the Municipality.
The President is the executive body of the Municipality,
elected by the Assembly for a term of four years, by a
majority of votes of the total number of councilors. The
work of the President of the Municipality is regulated by
the Law on Local Self-Government and the Statute.
In accordance with the Law on Local Self-Government
Financing, the funds to finance municipal own affairs
are provided in the Municipal budget. The sources of
funds are: own revenues, revenues transferred by the
law, funds from the Equalization Fund and funds from
the state budget.
The use of public funds implies the obligation to
establish an adequate system of financial management
and control and internal audit in accordance with the
Law on the Internal Financial Control System in the
public sector. Internal audit, as a separate organizational
unit, is obliged to be established in 15 municipalities with
over 10,000 inhabitants, while others can conclude an
agreement on entrusting internal audit affairs with
another internal audit unit, with the prior approval of the
Ministry of Finance that coordinates the system.
Upon the expiry of the year the budget is adopted for, the
Municipal Assembly adopts the final budget statement
with the external auditing report on financial reports of
the municipality. Given that there are no regional or local
audit institutions in Montenegro, the external audit of the
local self-government units is performed by private audit
firms that are selected through public procurement.
Supervision over the work of local self-governments is
carried out by the Government through: the Ministry of
Public Administration (Administrative Supervision) and
the Ministry of Finance (financial supervision).
The State Audit Institution as an independent and
supreme state audit body is obliged to include a certain
number of local self-government units in the annual
audit plan. For auditing local governments within the
SAI, the sector V, which, in addition to 25 local self-
government units, is also in charge of auditing 37
enterprises in which the state holds a majority share,
112 companies and 56 public institutions at the local
level, as well as Government's Department of Transport
and Maritime Affairs, or 235 audited entities (excluding
the entities in which the state has a minority share in
ownership). The Sector has 13 job posts of which 9 are
filled. Within the Sector, there is a department for
auditing local self-government units with 4 employees.
So far, the SAI has performed financial audits and
regularity audits of the local self-government units.
Auditing local governments by National Audit Office of Estonia over the last decade: nudging the system towards administrative reform
The National Audit Office of Estonia (NAOE) has been
auditing local governments more thoroughly since 2006
when the amendment of the National Audit Office Act
came into force, expanding the competence for control
of the National Audit Office. Prior to this the use of state
aid and EU subsidies and the state assets granted to the
local authority could be audited in the local authorities.
Assessing the use of the local authority’s own assets
were added to these as of 2006. However, competence
with regard to this is limited, and only the legality of using
municipal property can be audited, in other words
performance audit is not permitted. The main
arguments for expanding the competence were the need
to, in the future, receive an independent outside
assessment of the use of all the public money at the
disposal of the local authority and the desire to reduce
the risk of corruption in local authorities.
A separate team was established at the NAOE for
auditing local authorities, and to date, it has carried out a
total of 86 audits. These have, to some extent, concerned
all the local authorities in Estonia.
To date, the NAOE has, in general, carried out two types
of audits in local authorities: institutional audits (25%)
and the so-called sector audits (75%). The difference is
foremost in the number of the auditees and the
substantive extent of the issue at hand. Institutional
audits have inspected a specific local authority or some
of its unit or association. The audits have mostly
concerned the legitimacy of their economic activity,
financial accounting and the internal control system.
Sector audits, on the other hand, address some task of
the local authority (e.g. education, social welfare, spatial
planning, construction and road management) or more
narrowly some issue (e.g. prevention of corruption) in
parallel in several local authorities simultaneously (see
drawing 1). The focus has mostly been on whether the
local authority is capable of performing its tasks; the
objective is identifying systematic problems and helping
to resolve these (e.g law, draw guidelines). Therefore,
sector audits are more awaited, and the emphasis of our
work has shifted to them over time.
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Drawing 1. Most audited areas in auditing local authorities
Of the most important recommendations of the National
Audit Office concerning the development of local
authorities made in the audits, 2/3 have been
implemented fully or partially. The most important
issues and recommendations revealed in the course of
the audit have been summarised in the annual overviews
of the National Audit Office to the Parlament concerning
the use and preservation of state assets. As of 2008, the
National Audit Office has outlined the need for
administrative reform in its audits and overviews to the
Parlament.
Moving from one audit project to another it has become
evident that there are too many too small local
government units in Estonia that are not able to and will
not be able in the future to cope properly with the tasks
given to them. The state has decisively to undertake an
administrative reform, which has been postponed for
years due to indecision.
In October last year, the administrative reform was finally
carried out; the Administrative Reform Act and criteria
entered into force on 1 July 2016. Before the
administrative-territorial reform, there were 213 local
authorities in Estonia, which were divided into 183 rural
mun ic ipa l i t i es and 30 c i t i es . Fo l lowing the
administrative reform, there are 79 local authorities in
Estonia, divided into 15 cities and 64 rural municipalities.
In total, 185 local authorities merged. The mergers
entered into force by confirming the election results of
local authorities.
Table 1. Statistical indicators of local authorities before and
after the administrative reform
Before the
administrative reform
After the administrative
reform
With less than 5,000
residents 169 local authorities 15 local authorities
With 5,000–11,000
residents 28 local authorities 36 local authorities
With more than
11,000 residents16 local authorities 28 local authorities
Average number of
residents 6,349 17,118
Average area 204 km2 550 km2
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The National Audit Office is satisfied that it has been able
to contribute to planning the administrative reform
carried out in 2017. The National Audit Office has hoped
to help Parlament make decisions that enable the new
local authorities to become stronger to be able to
perform the tasks given to them and that the state and
local authorities would be good co-operation partners.
Performance audit on the use of the local budget funds for lawn facilities and landscape maintenance in Bucharest in the period 2007-2014
The Constitution stipulates that "the State recognizes
the right of everyone to a healthy and ecologically
balanced environment", protection and sustainable
management of green spaces in highly urbanized cities
of Romania becoming public interest objectives, as
stipulated in Law no. 24/2007 regarding the regulation
and management of green spaces in urban areas.
Currently, the green spaces on the territory of Romanian
localities are increasingly endangered due to their
destruction following the negative impact of economic
and social development. Therefore, the lack of
appropriate environmental management and a lack of
strategic planning can lead to health problems and
reduced quality of life standards.
Increasing green areas, the main component of
improving the environment and climate is one of the
main objectives of the Europe 2020 Strategy, adopted by
the European Council of 17 June 2010, amid a deep
economic crisis and the intensification of long-term
challenges, such as globalization, pressure on resources
use and aging. The Europe 2020 strategy proposes a
new economic vision that will help the EU emerge from
the crisis and build a smart, sustainable and socially
inclusive economy delivering high levels of employment,
productivity and social cohesion.
The main objective of the audit is to assess the modality
of substantiation, allocation and use of local budget
funds for the improvement, maintenance of green
spaces, the development and maintenance of
playgrounds and recreation facilities for the acquisition,
maintenance and management of street furniture and
fountains, in terms of economy, effectiveness and
efficiency of use of budgetary resources, and their
impact on the improvement of the environment, comfort
and health of the local community in Bucharest, with the
aim of making recommendations on reducing the cost of
resources allocated and increasing the results of
management of green spaces.
The specific objectives of the audit were:
� analysis of the existing legislative framework on
environmental programs and policies, and of the one
regarding the establishment, allocation and use of
public funds for expenses and investments in the
development and maintenance of green spaces,
p laygrounds and recreat ion , the ambient
improvements and acquisition of street furniture;
� substantiation of the decision to outsource works
and services for the development and maintenance
of green areas and playgrounds, value, share and
composition of expenditure made in own and those
contracted
� assessing the modality in which accounting and
technical and operational management of green
spaces is organized and managed as well as of the
progress of cadastre and registration thereof,
according to Law no. 213/1998 on public property and
its legal status
� planning, substantiation, engagement and use of
public funds for investments and expenditure as
those covered by the audit action
� analysis, in terms of the 3 "E", of investment and
expenditure.
Internal legislation, being harmonized with European
legislation is still uncorrelated and issued very late (2-4
years difference to the European standards), having as
direct consequence non-implementation or late
i m p l e m e n t a t i o n o f E u r o p e a n s t a n d a r d s o n
environmental quality and failure to attain the indicator
"green space area /capita".
In Bucharest there is lack of strategy-based projects,
with negative consequences in transposing indicator
regarding the green space/ capita imposed by Directive
by the EU, which was taken over mechanically, without
establishing the concrete rules, policies, stages,
deadlines and responsibilities for each entity involved in
the process.
Although there is some concern for improving
environmental conditions, several programs being
developed and underway in this direction, Bucharest is
the most polluted capital in Europe, according to the
Environmental Protection Agency.
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Moreover, there was even a decrease in areas with green
spaces as a result of restitution to former owners of land
for this purpose, and by the erroneous inclusion in this
category of green spaces public property of those
privately-owned, green space in the property of public
domain registered considerable decreases during 2007-
2014.
In fact, in Bucharest was found that there is no policy to
increase the green areas, that found during the audit
being purely conjunctural, and in the "National
Programme for improvement of the environment quality
by creating green spaces in cities" no project was
submitted to obtain reimbursable financing, because the
eligibility conditions set are not fulfilled as the land
related to green spaces are not registered in the heritage
of the entity nor in the Land Registry of the village, so
documents attesting the legal status of land on which to
realize the relevant projects cannot be presented.
Regarding the technical-operational and accounting
records of land belonging to the public domain,
representing parks, gardens and green spaces, it was
found that they were not evaluated were not taken
measures to prepare topographical and tabulation
documents of these, conditions in which they can be
considered as private domain of the municipality and
retroceded by the courts or local administrations, and,
on the other hand, cannot be drawn up projects to obtain
grants for improvement of these areas, a task that
should be a priority for each local authority.
Technical and operational records of green spaces was
not organized using local Registry, according to
provisions of the Law no. 24/2007, objectives cannot be
achieved by organizing local registers, respectively:
• deficient areas identification and performing works
for expanding areas covered with vegetation;
� expanding areas under green spaces, by including in
t h e g r e e n s p a c e s c a t e g o r y o f l a n d w i t h
environmental and socio-cultural potential;
� development and implementation of multiple
measures on bringing and maintaining green spaces
in the proper condition according to their purpose;
� regenerat ion , expans ion , improvement of
composition and quality of green spaces;
� protection and preservation of green spaces to
maintain their biodiversity.
The institutions that manage green spaces in Bucharest
showed a certain concern for their maintenance,
performing landscaping and provision of street furniture,
as well as for setting up playgrounds in recent years
being recorded a significant improvement in the
appearance of parks and green areas.
From this point of view, it can be seen that Bucharest can
compare with the other capitals of the European Union
countries on flowers, shrubs and trees planted, urban
furniture and landscape design, but not reported to the
principles of economy, efficiency and effectiveness in
the use of budget funds for the landscaping and
maintenance of green areas.
It was also showed that establishing the necessary
funds for performance of activities of lawn and
landscape maintenance, does not have as support
principles rigorously established, creating the possibility
of exercising effective control of funds for this purpose
and to act in the spirit of growth performance for using
these funds.
In this context, entities proceeded to extensive
outsourcing of services for the development and
maintenance of green areas by concluding framework
agreements over several years, with very high values,
without a comparative analysis of their cost, if they
would have been made by direct labour. In general, the
level of prices/rates for goods and works/services of
development and maintenance of green areas were not
substantiated on the basis of technological process
costs, in which to be included expenses with materials,
labour and transport and a share of indirect costs,
assessed at the uniform unit prices, set according to
information from market research, and quantities of
works were often substantiated, based on unrealistic
estimates or plans.
Security services expenses substantiation was not
based on calculations of efficiency, based on the value of
goods found to be vandalized and stolen from parks in
previous years and has never been examined the
possibility of conduct of activity by local Police (public
institution) at no extra cost.
Moreover, at all entities was found that budgeting is not
based on concrete projects and programs, approved by
the main spending authority, in order to finance actions
to improve environmental conditions, which to be
associated with precise objectives and indicators of
results and efficiency. At the same time, it has not been
made any estimate of annual targets and performance
of these programs, based on cost and environmental
and social effects, their compliance was not analysed
either, given the lack of documentation specialized in
landscape planning. This approach generates risk of
allocation and use of public funds in inefficient and
ineffective manner.
Given the inadequate substantiation of the level of
expenses, it was found that at the level of auditees is not
established and is not intended for the production
performed in direct labour, a system of indicators by
which to quantify the cost of achieving dendrological
and floriculture production, by which to follow the
efficiency of that activity and there is no system of
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performance indicators organized by which to mainly
monitor: the duration of the technological process, the
cost of technological process and the synchronization of
the dendrological and floriculture production process,
with the needs for landscaping, both in terms of quantity
and structure of plants, so as to eliminate, to a large
extent, purchases from third party suppliers.
There were also recorded expenses inefficient and
uneconomic by landscaping green areas damaged
subsequently, before the expiry of the duration of use
thereof, even in proportion of 100% by making
rehabilitation works of the road system, due to lack of
communication between district mayors and City Hall.
Analysing investments and expenditure in terms of the 3
"Es" by calculating the indicator "average cost per square
meter of green space" in the audited period, there can be
noticed large differences both between sectors and from
one year to another, which indicates the lack of a
coherent strategy and potential payments uneconomic
and inefficient, the main causes identified referring to:
� improper substantiation of investments in this area
by conducting pedestrian construction and facilities
in areas already landscaped, inconsistent with the
strategic objectives regarding expansion of green
areas or by making purchases of street furniture that
are not placed in service and do not serve to the
stated purpose (District 3);
� establishment of companies majority owned by local
budget for administration of the public domain,
inefficient and uncompetitive and, which, every year,
cause bigger losses, being funded by districts
through capital increases (District 3, District 4,
District 5);
� very big differences between the prices at which
public institutions involved have acquired both
facilities and dendrological and floriculture material,
which is a clear indication of uneconomic
expenditure in the absence of cost standards and
regulations;
� settlement, of the prices overvalued and artificially
inflated, from the local budget, due to a lack of
genuine competition between the companies
participating in the procurement and subcontracting
of works and services, existence of intermediate links
between beneficiaries (local public authorities, public
institutions in the field) and producers, constituting a
factor in the price growth;
� drastically reducing the production of dendrological
and floriculture material, in direct labour, having as
direct consequence increase in expenditure with
planning and maintenance of green areas.
Recommendations
� valuation of land held under management, according
to Government Ordinance no. 81/2003 on revaluation
and depreciation of assets owned by the public
institutions, as amended and supplemented, and
inventories thereof under the Law no. 213/1998;
� public domain land inventory submission to
Bucharest municipality for the elaboration of
documentation necessary for validation and
recording in the accounting thereof, in accordance
with Government Decision no. 1031/1999;
� establishing criteria for awarding procurement
c o n t r a c t s , w h i c h s h a l l m e e t t h e s p e c i fi c
requirements to the most favourable offer of the
entity acquiring, through the performance indicators
of using public funds and that stimulate participation
of direct producers;
� review of the modality to establish rates by detailing
and explaining the component items, according to
consumption regulations in accordance with the
requirements of Art. 11 of Order no. 109/2007 of the
ANRSC regulat ion authority, regarding the
determination of specific rates in sanitation;
� establishment of an organized system for exchange
of information between local authorities and districts
of Bucharest, to avoid undue and uneconomic
expenses for improvement and maintenance of
green spaces on which municipal infrastructure
works to be carried out. In terms of occurrence of
these circumstances to take all legal steps so that the
land be restored to its original state;
� substantiation of Annual Plan for Plantings, on
studies on the soil quality and climatic conditions, so
as to be planted only species adapted to soil and
climatic conditions;
� measures to organize the technical-operative
records of green spaces managed in terms of
vegetation (shrubs, perennials, trees, including
protected trees), present on premises managed by
audited entities, in order to plan and exercise control
over changes quantitative and qualitative of green
areas, namely on the identification, integrity and their
preservation;
� developing a system of technical and economic
indicators, which shall ensure: recording and tracking
costs by achieving dendrological and flower
production and optimization of dendrological and
flower production process;
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� assessing the performance of public funds use in
order to make judgments about the performance of
spending the local budget funds on this segment of
activity, agreeing and monitoring a series of
performance indicators, unimplemented until the
audit date;
� implementation and monitoring of performance
indicators recommended by EUROSTAT, namely:
square meters of green space / capita, lifestyle
horticulture (indicator adopted in recent years by the
European Union, given the increasing profitability in
the short and long term, registered by its founder
Queensland - United States), number of playgrounds
in the area / number of allocated children aged 2-7
years;
� inclusion in the action plan of the internal audit, of
audit missions with objectives in the field of
landscaping and lawn maintenance, landscaping and
maintenance of playgrounds / recreation acquisition,
maintenance and management of street furniture;
� elaboration of a short, medium and long term
strategy, to establish the technical, economic and
performance indicators specific to the activity of
management, improvement and maintenance of
green spaces;
� procurement of services on development and
maintenance of green areas shall be based on a study
of opportunity and necessity, given the ability to
achieve them by direct labour and given the specific
industry, as well as based on projects for each
location in part, by establishing and defining clear
objectives and works executed by direct labour, by
those contracted with third parties;
� development and implementation of operational
procedures on the modality of procurement
landscaping works, by which, in the phase of
substantiation, signing and performance of
contracts, to be provided features and standard
dimensions of plants, as well as terms and conditions
specific to the field, regarding: guarantee for a
reasonable period of time, allowing;
� observation of plant and dendrological material
v iab i l i ty as wel l as speci fy ing mandatory
technolog ies to observe for p lant ing and
maintenance.
Performance audit of public funds for thermal
rehabilitation of housing in the sectors of Bucharest, in
the period 2010-2014
The need for thermal rehabilitation of blocks of flats, in
order to ensure and maintain indoor environment
climate in homes, was generated by to achievement of
the objectives of improving energy performance to end
users, as well as of the achievement of the national
targets for energy savings, assumed by Romania, by
transposition of Directives of the European Parliament
and the European Council adopted in this area. It was
also envisaged that the "Increasing energy efficiency"
objective is strategic and is part of the third objective of
"20/20/20" in the field of climate and energy changes,
included in the Europe 2020 strategy - An European
Strategy for smart, sustainable and favourable to
inclusion growth.
Imposition of measures for thermal rehabilitation of
housing has been regulated since 2000, when the
ordinance no. 69/2000 was issued regarding the
thermal rehabilitation of recently built fund and
subsequently, by GEO no. 174/2002 as amended and
supplemented, the aim of these measures being to
reduce consumption and energy losses and decrease
fuel consumption during critical winter periods.
The specific objectives of the audit engagement
pursued if:
� law governing the conduct of this program is
sufficiently clear and covers all the cases, and the
introduction of cost standards had the expected
impact in reducing and streamlining expenditures for
this purpose, made from the local budget;
� steps required to implement local programs were
observed by representatives of the administrative-
territorial units by, the identification and inventory of
apartment buildings; notifying owners associations
by local coordinators regarding the enrolment in the
local program; existence of the decision of the
general meeting of owners of enrolment in local
program and signing of the mandate; design
intervention works; execution of intervention works;
acceptance on completion of works and release of
the energy performance certificate, identifying
specific annual energy consumption calculated for
heating; final acceptance after expiry of the
performance guarantee period of 3 years;
� technical and economic indicators of the
endorsement documentation for the execution of
intervention works in residential buildings is based on
compliance with the standards costs in the
construction field which is approved by law by
Government decision;
� the three "E": efficiency, effectiveness and economy
of local and government programs carried on
regarding increasing the energy efficiency of
residential buildings, were observed.
Analysing expenses with thermal rehabilitation of
residential buildings - payments related to the districts of
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Bucharest, for 2010-2014, amounting to RON 3,343,783
thousand, is found that they represent 26.27% of total
spending made, respectively 68.49% of capital
expenditures made by them.
Financing the thermal rehabilitation works of residential
buildings was achieved in the audited period from three
sources, namely state budget, local budget and a share
paid by associations of owners/economic operators,
noting that in Bucharest, amounts allocated from the
state budget for this purpose have decreased year by
year, from RON 56,434 thousand in 2010 to only 19,785
thousand in 2014, but increased the amounts allocated
from the local budget from RON 314,500 thousand in
2010 to RON 55,359 thousand in 2014.
It is noteworthy that that the main source of funding of
such type of spending at district town halls was
represented by loans contracted by internal and external
credits, the total amount of payments performed from
loans, amounting to RON 1,773,865 thousand, with a
share of 53% of the total payments performed for the
thermal rehabil itation of residential buildings
(amounting to RON 3,343,783 thousand)
Regarding the implementation of this program during
the period audited was found:
� although thermal rehabilitation of residential
buildings was considered a priority and urgent action,
all regulations issued to implement the National
Programme, adopted by the Government by
ordinances or emergency ordinance, were ineffective
for a great period of time, as a result of incoherence
and inconsistencies thereof;
� territorial-administrative units have not taken
measures to complete the action for verification and
identification of apartment buildings, designed and
built between 1950-1990, in order to be included in
the rehabilitation program, data sheet for each
apartment building, following the model established
by norms; in context, there has not been an inventory
and a group of apartment buildings on districts/
blocks/heating units and types of blocks, with
constructive solutions similar to the tire, depending
on the design period and, consequently, a medium
and long-term program for development of thermal
rehabilitation works was developed;
� regarding the execution of intervention in 2010-2012:
� by dividing the total average cost per square meter of
floor area, for all thermal rehabilitation works carried
out, we can note the following :
� in districts 2, 3 and 4, average costs were lower than
the standard cost, calculated according to
Government Decision no. 353/2010;
� in districts 1, 5 and 6 the average costs exceeded the
standard cost of 55 euro/ sqm, by 36 euro/sqm in
District 1, by 2 euros/sqm in district 5 and by 34
euro/sqm in District 6;
� by report ing the costs of the basic works
(intervention works provided under Art. 4 letter a) - d)
of G.E.O. no. 18/2009) per square meter of floor area,
we shall note the following
� in districts 2, 3, 4, 5 and 6 exceedances of the
standard of cost have not been recorded, calculated
according to G.D. no 353/2010;
� in District 1, the approved standard cost was
exceeded by 8 euro / sqm.
In conclusion, during the period audited, the costs paid
for works of therma rehabilitation of the apartment
buildings (building + assembly) recorded very big
differences between districts and could not be justified
only by the quality of different materials or the number of
operations performed, which is an indication that there
are significant doubts for lowering the costs:
� on compliance with the standards of cost, excepting
the 1st District, was found the compliance with the
standard calculated for the basic works, provided by
legislation in force, but by comparing average total
costs of thermal rehabilitation works (C + M without
overheads, design, assistance, consultancy and site
organization), exceeded the standard cost also for
sectors 5 and 6, the significant differences may
indicate important differences regarding the quality
of materials used and the potential uneconomic
costs, with the ability to identify large reserves to
reduce budget expenditures incurred for this
purpose;
� regarding the issuance of the energy performance
certificate, identifying specific annual consumption
of energy calculated for heating - effectiveness of the
program, it can be appreciated that the Programme
of thermal rehabilitation of residential buildings has
reached its goal in the Bucharest districts, meaning
that at present, the specific consumption for
buildings with thermal rehabilitation ranges on
average at the value of 69 kwh/sqm, well below the
target of 100 kWh /sqm, set by legislation in force
(conclusion is based on the sample of apartment
buildings for which energy performance certificate
was issued at the end of the work);
� in terms of local budgets, the program of thermal
rehabilitation of apartment buildings was ineffective,
given the fact that costs were paid almost in full from
the local budget, given that under the relevant laws in
force, local budget had to bear up to 30% of costs, the
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full taking over of rehabilitation costs being provided
as an exception;
� regarding the observance of principle of minimizing
the cost of resources used without compromising
the objectives, it can be concluded that Program
development has not achieved this objective
considering the overcoming, in many cases, the cost
standards approved for these expenses and also the
large amount of illegal payments, identified during
the audit. Thus, deviations recorded in the minutes of
finding, some of which are causing damage, are
totalling RON 9,061 thousand, noting that the
damage found were fully ascertained during the
audit;
� regarding the impact of this program on population,
according to the opinions expressed by respondents
of the opinion poll resulted that:
� satisfaction of the residents regarding the
rehabilitation work is generally very good and good;
� satisfaction of the residents work regarding the
finishing, it is generally good;
� period since the date of the application submission
by the owners' associations and the date they started
rehabilitation work was appreciated by owners of
buildings, as being very long;
� Rehabilitation works have achieved the goal, realizing
savings of 25-30% on the heating invoice value.
Recommendations:
� analysis performance at government level, on the
current state of the running of the Program on
increasing the energy efficiency of residential
buildings in order to establish performance
indicators, targets and timetables for achieving the
goals on medium and long term as well and of
concrete ways for implementation in the national
legislation of Directive 2010/31/EU on energy
performance of buildings and departments resulting
from the European Commission report to the
European Parliament on the energy perspective
2050;
� cost standards completion with the other categories
of work provided by law and absolutely necessary to
achieve the thermal rehabilitation of apartment
buildings; the mandatory compliance with those
standards, while organizing and running the public
procurement process, and also the calculation and
determination by the standard cost approved
according to the law of the average cost / square
meter of total usable area, indicator which was
removed since 2013;
� establishing clear urbanism rules by which to be
established constructive criteria and colours to be
applied to buildings rehabilitated, based on a unified
and coherent concept, capable of change for the
better the towns’ urban settlements, avoiding the
frequent slippages generated from the use of
solutions and colours chosen indiscriminatingly;
� developing a medium and long term strategy on the
running of the Program for thermal rehabilitation of
apartment buildings, based on real possibilities of
financing from the local budget and in correlation
with other investments and projects, scheduled in
every phase;
� initiation and execution of media campaigns for
notifying owners associations on enrolment in the
thermal rehabilitation program of documents, forms
and documents required and the criteria and legal
deadlines for each process;
� establishment and approval of the criteria for
inclusion in the Annual Programme of thermal
rehabilitation of blocks of flats and monitoring of their
compliance through checks and periodic reports,
which are also covered;
� completion of the inventory of residential buildings
constructed until 1990 and completion of data
sheets for them, according to the model established
by norms;
� preparation and approval in each sector, of certain
intervention regulations on building facades of the
blocks which shall include urban, aesthetic and
architectural features with the purpose to ensure the
identity and coherence of each area and the
harmonious integration thereof throughout each
s e c to r a n d s e n d i n g t h e m to UAT M B , f o r
acknowledgment and inclusion in the General Urban
Plan of Bucharest;
� developing and implementing of a procedure to verify
if it complies with the cost of approved standard,
overall and on each component on the occasion of
elaboration and approval of the technical-economic
indicators for the objectives included in the
investment lists as well as monitoring of their
compliance during the course of investment and
work settlement;
� taking the necessary steps for acceleration of
organization and acceptance phase of goals to which
the works were completed and issuance of the
energy performance certificates;
� identification and disposal of the measures required
for the necessary paperwork and applying for
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implementation of structural and cohesion funds of
the European Union, according to Government
Emergency Ordinance no. 63/2012 amending
Government Emergency Ordinance no. 18/2009,
which provides coverage from this source and the
state budget, of 60% of the funds required for
enveloping blocks;
� developing a set of rules and procedures for
communication with owners associations on
every phase of development of the design,
commitment and investment running process, given
their capacity of final beneficiaries and party directly
affected by the whole process of intervention on
buildings;
� expansion of verifying all payments performed in the
audited period for the investment objectives
regarding thermal rehabilitation of blocks of flats, in
order to identify all quantities of works not performed
but paid, quantification of the possible damages thus
produced, recording in the accounting and their
recovery, under the law.
� works for intervention at the heat distribution system
for heating, relating to the common parts of
apartment buildings, which have an important
contribution to eliminating heat losses, shall also be
included in the thermal rehabilitation works.
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Audit „Do local governments provide services to their residents for reasonable costs?“
In 2016/2017, the State Audit Office (SAO) of Latvia
carried out two audits on paid municipal services and
the use of administrative resources in 20 out of Latvia’s
119 local governments. With these audits, we were
looking for answers to several questions. Can residents
be certain that local governments operate in an efficient
manner? Are the best possible services provided for the
resources used by local governments? Are local
governments aware of effectiveness and productivity of
their work? How effective and economic are processes
when providing services? Do residents overpay for the
provided paid services or vice versa — these services
create additional unexpected expenses to the budget of
local government, thus taking the financing away from
other important tasks?
In Latvia, legal acts stipulate services which local
governments must provide to their residents, for
example, organisation of provision of utilities, issuance
of street sale permits, catering for children at schools.
However, the audits showed that local governments also
engage, sometimes unlawfully, in business activities,
which go beyond the autonomous functions of local
governments (transportation services, hotel and
catering services etc.) and therefore hinder the
development of private businesses within their
territories.
During the audit, the SAO of Latvia assessed whether
municipal services are client-oriented and whether
municipal resources and organisational structure are
adjusted to this task. The management and provision of
services was evaluated according to the service
implementation scheme provided below (Figure 1).
Figure 1. The process of managing and providing services
The SAO of Latvia used process analysis approach to
assess municipal services – experts identified excess
steps in service provision and calculated their costs. Re-
evaluation of processes provides an opportunity to
obtain comparable information about implementation
of similar processes in different structural units and
local governments which can later be effectively used
for benchmarking.
For example, by comparing the organisation of
accounting processes in local governments of similar
size, the experts concluded that centralisation of
accounting at a particular local government could save it
at least 43 200 euro per year. The audits also highlighted
several systematic problems in local governments:
� local governments insufficiently assess demand for
their services and do not perform proper accounting
and analysis regarding the costs of service provision;
� work organisation of local governments frequently
promotes provision of services in person instead of
fully using online opportunities;
� local governments do not collaborate enough in the
provision of services for residents, thus not taking
advantage of possibilities to reduce their service
costs.
Based on audit findings, the SAO of Latvia provided 192
recommendations to 20 local governments, the
implementation of which:
� would initiate the accounting of expenses for
Finally, the audit team agreed to accept any case where
municipalities were “granting an economic advantage”
as a subsidy. This definition also included non-monetary
funding activities like the free of cost provision of
municipal infrastructure.
During the actual audit, the most demanding task was to
gather and val idate the funding data of the
municipalities. Based on that, the vast number of single
transactions had to be structured and aggregated in a
comprehensive way. To achieve that, the ACA opted for
graphic representation. The example shows the subsidy
structure of Traun, the size of the bullets refers to the
subsidy amounts. Traun funded several fields and
institutions:
Based on the findings, the ACA developed some main
recommendations. Firstly, the ACA criticised the lack of
transparency in the financial statements. Subsidies
could not be recognized without considerable effort,
although the accounting rules offered an appropriate
classification. Due to the lack of a standardized
definition and the different monetary assessment of
subsidies, direct comparison between municipalities
had low validity. Therefore, the audit report did not focus
on benchmarking. To improve transparency, the ACA
recommended to report municipalities’ subsidies to the
federal transparency database, which was designed to
provide an overview of all public benefits in Austria.
The ACA also tried to assess the efficiency of the
subsidies. Unfortunately, cost-benefit considerations
were not a big issue in the audited municipalities.
Consequently, the ACA found only some basic
evaluation approaches, for instance in the field of sport
subsidies.
Beyond that, information about the effectiveness of
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processes and services to acquire precise and
comparative information needed for taking of
economically justified decisions;
� would raise awareness among residents about the
process of service provision, explaining advantages
of electronic services, thus reducing costs and time
spent;
� would allow local governments to start using their
analysis methods for fundamental and support
processes in order to save resources and reduce
administrative burden for residents.
For more detailed information about the audits and
their findings please see the summary report, which is
available in English here:
http://www.lrvk.gov.lv/en/revizija/local-governments-
provide-services-residents-reasonable-cost/
Subsidies in municipalities –
A cross-cutting audit in Austria
While federal subsidies are a hot topic for both the media
and the general public – mainly due to their sheer
amount – subsidies on a municipality level are a much
less prominent issue. Therefore the Austrian Court of
Audit (ACA) decided to take a closer look at this topic in
three Austrian municipalities, focussing not only on
efficiency and effectiveness of municipal subsidies and
related administration procedures, but also on the
underlying strategies.
First , the audit team had to choose relevant
municipalities. Therefore, the ACA’s municipality
monitoring tool was used to analyse spending on
subsidies by municipalities with more than 20.000
inhabitants. Considering recent or possible parallel
audits, some possible auditees could not be included in
the final choice.
Aiming for a representative selection, the ACA decided to
audit one municipality from the western part of Austria
(Feldkirch), one from the middle (Traun) and one from
the east (Baden).
In addition to the selection process, finding a feasible
definition of “subsidy” turned out to be a challenging
task. Numerous possible definitions could be found,
none of which covered all relevant aspects of the topic.
a
A
b
B
c
C
Child Care
Cultured
D
e
E
Economy
Education
Environmentf
F
Funding Traun
g
G
h
H
i
I
j
J
KL
M
N
O
Others
P
Q
RS
Social Affairs
Sports
T
UV
W
XY
Youth
Z
Steering of local government finances audited in Finland
Audit subject
The audit on steering of local government finances was
launched in June 2017 on the grounds of preliminary
study carried out during spring 2017. Subject of the audit
consists of the macroeconomic steering system applied
by ministry of finance as a part of general government
fiscal plan, and the Local Government Act in which the
finances of single municipalities are regulated.
The macroeconomic steering includes a balance target
for local government finances and the measures
required to achieve the target set by the Government. In
addition, the Government sets a local government
spending limit, namely a euro limit for the change in
municipalities’ expenditure due to central government
measures during the parliamentary term. Furthermore, a
local government finances programme is prepared in a
central government and local government negotiation
procedure as part of the preparation of a general
government fiscal plan. In the programme, more in-
depth analysis of the local government economy
compared to the general government fiscal plan is
carried out.
In the Local Government Act, certain borderline values
for chosen key figures are set in order to steer the
finances of single municipalities, joint municipalities and
local authority corporations. In the audit, these
borderlines, reliability of their measurement and their
incentive effects are examined. Also the system of
central government transfers to local government and
especially its incentive effects to municipalities are
audited.
In addition to the above described macro and micro level
steering systems, attention is payed to the organization
and processes of local government steering within the
ministry of finance, which is responsible for the local
government steering as a whole.
Goals
The aim of the audit is to determine whether the local
government steering system is effectively working –
taking into consideration its goals and restrictions – so
that trends in local government finances can be
impacted timely and beforehand, in order to ensure the
sustainability of public finances. In addition, the aim is to
assess and improve the openness and transparency of
the steering process and methods, and to examine the
reliability of the information base of the steering and the
development work done in the subject during recent
years.
Audit questions
In the preliminary study, three main audit questions were
specified: 1) Does local government macroeconomic
steering offer timely and reliable information for the
general government fiscal plan process and support the
achievement of the fiscal plan goals?; 2) Do the
regulations concerning municipal finances set up in the
recently renewed Local Government Act promote
economic sustainability of the municipal finances in
long run?; 3) How do these two steering systems, macro
and micro level, fit together from the point of view of
achieving the general government target balance?
Preliminary results and schedule
Already at this stage of the audit it can be concluded that
the recent reforms made to the macroeconomic
steering system as well as to the Local Government Act
have significantly improved the local government
steering as a whole. However, several development
targets can also be pointed out.
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subsidies is also an essential condition for a valid
comparison between municipalities. Otherwise, a fair
comparison cannot be achieved. Therefore, the ACA
recommended to improve the outcome orientation and
the use of cost-benefit analysis in the field of subsidies.
Information about the costs and the real benefit for the
citizen should be a crucial criterion in giving subsidies,
also on an municipal level.
The german version of the audit report is available on
the homepage of the ACA:
http://www.rechnungshof.gv.at/fileadmin/downloads/_jahre/20
17/berichte/teilberichte/oberoesterreich/Oberoesterreich_2017_
06/Oberoesterreich_2017_06_1.pdf
Public Participation in Israel
Over the last two years, for the first time in Israel, the
Office of the State Comptroller and Ombudsman carried
out a structured public participation process. It sought
input from the general public about government
homecare services provided to the elderly. A private not-
for-profit organisation was chosen to plan and manage
the public participation process.
The report, which was published on 1 October 2017, had
found that home care sponsored by the state failed the
elderly in a wide range of areas. It is estimates that about
300,000 persons were exposed to the audit process
through the use of social media. The report is based on
in-depth survey of 687 persons who were selected as
part of the public participation process.
One major issue was that of the quality of the services
provided to the elderly. The report has found major
failings in that respect and it is widely accepted that this
specific finding would not have been possible without
the participation process which provided important
insights from the (so-called) clients' perspective.
In the next participation stage, which has only recently
begun, the public will be involved in assisting the process
of the selection of the topics that the State Comptroller
will audit. Local government audit issues have been
picked for the first pilot programme with special
emphasis on marginalised populations and peripheral
localities, in the spheres of social services and
infrastructure. The participation procedures are
expected to include seminars, roundtables and specific
consultations with experts, NGOs, Academia and other
interested entities.
The State Audit Office of Hungary (SAO) developed an
innovative method to support the spreading of audit
experiences in a wide range of entities. The system of
self-tests was implemented to provide a tool to assess
the regulated and regular operation of municipalities by
themselves, extended also to cover other types of public
entities. As an element of the SAO’s advisory activity,
self-tests are designed by using the relevant audit
results, can be completed on a voluntary basis, and are
suitable to identify irregularities as well as measures
necessary for correction at the completing entity.
Regularity is the basis of accountability, transparency,
proper and goal-oriented, responsible use of public
funds, efficient and effective public services, as well as
preserving and increasing the value of the national
wealth entrusted to a public entity. In view of this, a major
component of the mission of the State Audit Office of
Hungary is to promote regulated and regular operation in
the public sector by all suitable means, maximizing the
benefit of its audit activity. Taking into consideration the
fact that there are more than 3200 municipalities in
Hungary, innovative solutions had to be developed in
order to facilitate utilization of audit experiences in a
significantly broader range of entities than audits are
able to cover.
To assess compliance with regularity requirements by
the entities themselves was considered as the most
suitable method to reach practically any municipality (or
other type of public entity), not depending on the
capacity constraints of the SAO. As a tool for such self-
assessment the system of self-tests was developed,
starting with the self-test for municipalities issued in
November 2014. This self-test consists of questions
covering major areas of the internal control activities
based on the audit questionnaire used for auditing
internal control systems. The self-test can be used
independently, without any detailed knowledge of the
actual relevant legislation as background explanation
and definition of measures necessary in case of non-
compliance is provided for each question.
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Self-tests – an innovative method of the Hungarian SAI to spread audit experiences
NEWS FROM MEMBERS TFMA NEWS APRIL 2017 – JUNE 2018, NO.1 25
Self-tests are revised and updated regularly in order to
reflect changes in the regulatory environment. They
provide uniform and understandable information on
fundamental regularity requirements and support wide
range of entities to assess their compliance with
requirements on a standardised basis. Completion of
self-tests occurs on a strictly voluntary basis, the SAO
does not receive any information on the result of self-
assessment carried out in this way. This means that
audit results are synthesised in a list of questions to be
used by the relevant public entities upon their own
discretion.
Since the issue of the first version of self-tests for
municipalities, self-tests targeting regular operation of
other types of entities using public funds such as
budgetary and ecclesiastical institutions have been
designed. As the latest development, in order to address
an area of high relevance having a complicated
regulatory framework, self-tests to assess the regular
handling of EU support for budgetary institutions and
also companies were issued in 2016.
To facilitate broad accessibility, self-tests are published
on the official website of the SAO. As they are prepared in
the form of a regular EXCEL sheet, no specific IT tool is
needed for downloading and completing them.
Publication of a new self-test or an updated version of an
existing one is announced by a press conference or
communique, explaining its benefits for the related
parties.
In lack of information on completion, the SAO assesses
the utilization of this unique tool by collecting download
data. Quarterly and cumulative download statistics
show a constantly growing interest, especially frequent
downloads are experienced in the months following the
publishing of a new self-test type or an updated, renewed
version.
In accordance with the budget law, the medical
subvention is directed from the state budget to the local
budgets to pay for current expenditures of communal
health care institutions, except expenditures for utilities
and energy.
In 2016, local authorities spent 85 percent on health care
at the expense of medical subventions expenditures (for
a general fund).
In the first quarter of 2017, the State Expenditures in
Region Audit Department of the Accounting Chamber
conducted performance audit on the use of medical
subventions aimed at providing treatment for patients
with renal insufficiency by the method of hemodialysis,
the results of which approved by the decision of the
Accounting Chamber dated March 28, 2017, No. 8-4 (the
Report and the Decision are posted on the website of the
Accounting Chamber on 24.05.17 and 11.04.2017
respectively).
The choice of audit subjects was determined by the
availability of information on a significant number of
patients with chronic renal disorder (hereinafter referred
to as CRD) in Ukraine, the need for three hemodialysis
procedures per week, the expensive treatment of
patients with CRD by hemodialysis, high workload of
existing centers of nephrology and dialysis, the round-
the-clock mode of their work.
In Ukraine, in 2015 out of 7610 patients with CRD more
than 63 percent received hemodialysis treatment.
The cost of only medicines and consumables for one
hemodialysis procedure in 2016 amounted to an
average of UAH 1,500 (EUR 55) and the minimum wage
in Ukraine in the monthly amount as of December 1,
2016 amounted to UAH 1,600 or EUR 59. Given the need
for three hemodialysis procedures per week, the cost of
treatment for one patient is 234 thousand UAH (8.6
thousand euros) per year. Most people fail to incur such
expenses, so they need state support.
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Information to the EUROSAI TFMA newsletter on the experience of the performance audit of the use of medical subventions aimed at providing hemodialysis treatment for patients with
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From 2016, target expenditures for the hemodialysis
treatment of patients with chronic renal disorder are
provided within the medical subvention from the state
budget to local budgets, in particular, by 2016, and by
2017, an amount of UAH 1 billion has been approved.
According to the Decision of the Cabinet of Ministers of
Ukraine, starting from 2016, in the formula of distribution
of medical subvention from the state budget to local
budgets, separate target expenditures for the treatment
of patients with chronic renal disorder by hemodialysis
method has created conditions and made it possible to
some extent to streamline and increase the level of
provision of departments of nephrology and dialysis of
communal medical facilities with appropriate medicines
and consumables for free weekly treatment of patients.
In view of these circumstances, the purpose of the audit
was determined the establishment of the actual state of
affairs regarding the accuracy of the definition and
distribution, timeliness and completeness of the
transfer, the legality and effectiveness of the use of
medical subventions aimed at providing hemodialysis
treatment for patients with CRD.
The subject of the audit was the funds of the medical
subvention from the state budget to local budgets, at the
expense of which the target expenditures of local
budgets were implemented in the blood donation
method by hemodialysis, legislative, regulatory and
other documents regulating the planning, distribution
and use of funds for the treatment of patients with a
blood donation method hemodialysis; financial, budget,
statistical and other reporting, information on the status
of the provision and use of these funds.
The objects of the audit were identified by the Ministry of
Health of Ukraine, departments and health departments
of the five regional state administrations, and a number
of communal health facilities. According to the audit, five
territorial departments of the Accounting Chamber were
involved.
During the audit, the main focus was on the number of
patients with CRD in Ukraine, the average cost of the
treatment of one patient in the blood pressure by
hemodialysis in communal and private medical
institutions, and the actual number of procedures per
year per patient, the need for the target funds necessary
on the treatment by hemodialysis method, the level of
provision of patients with a CPR at the expense of the
subvention necessary amount of medicines and
consumables, apparatus "artificial kidney", dependence
of communal medical institutions manufacturers of
apparatus "artificial kidney" meet existing network of
centers of nephrology and dialysis treatment to ensure
their work around the clock access of patients to obtain
their hemodialysis treatment.
The audit revealed that the main disadvantages of the
system of treatment for patients with chronic renal
disorder by hemodialysis is the complicated access of
patients to this procedure due to the lack of a system for
providing them with medical care; imperfection of tools
for forming the need for targeted funds; the unsettled
procedures for the purchase of hemodialysis medical
services and the lack of proper control over the planning
and use of funds.
Thus, the lack of a new model of the purchase of the
product "medical service" with the provision of the
possibility for patients to freely choose providers of
hemodialysis services led to the dependence of medical
institutions that receive hemodialysis equipment
"artificial kidney" free of charge or for temporary use,
from suppliers of consumables that are compatible
exclusively with these apparatuses. In the five surveyed
regions (Vinnytsya, Dnipropetrovsk, Poltava, Lviv,
Cherkasy oblasts), 87 percent of equipment available in
medical institutions, was received free of charge or for
temporary use.
Under such conditions, hospitals were forced to
purchase consumables that fit exactly this equipment.
As a result, the component of competition and
economical use of funds was virtually absent. As a
result , the average cost of one procedure of
hemodialysis only at the cost of consumables
significantly varied by region: in 2015 - from 1176 UAH to
1951 UAH (from 43 to 72 EUR); in 2016 - from UAH 1130
to UAH 2539 (from EUR 42 to EUR 93), and also
depended on the machinery of the facility (B / Braun,
Fresenius (Germany), Gambro (Sweden, Italy), Nipro
(Japan)).
Scheme of providing the medical institutions with
consumables and equipment for treatment of patients with
chronic rental disorder
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The Supreme Audit Institution for the first time
simultaneously provides the systematic insights about
the role of the state in governing companies and
institutions that operate in the public sector.
Three systemic audits – “The return of state-owned
companies to the State”, "Management and activities of
municipality-owned companies“, “The establishment
and management of public institution” – showed that
part of the public sector companies and institutions
currently do not create the added value to the state and
in certain cases benefit only the companies themselves,
public institutions or even private groups of persons.
The state policy in this area is fragmented, lacks
coherence and systematic state approach towards their
governance. Municipalities lack initiative to raise
common goals for the enterprises they control, a clear
and objective performance evaluation system for the
companies is not created, formation of a strong Board is
not ensured, also strategic indicators are unambitious
and not associated with the objectives of state-owned
companies and public institutions, and the progress is
not projected, not all the solutions are measurable and
ensure the benefits to the state or municipality.
The results of activities also shows inappropriate
governance of companies and institutions. In 2015
return on equity capital of municipality-owned
companies decreased compared to the previous
periods, and 5 (out of 271) of municipality-owned
companies earned 75 percent of dividends.
According to the Supreme Audit Institution, considering
the priorities and financial results of the companies and
institutions, it is appropriate to evaluate the activities of
public institutions and companies systematically, and to
make the following strategic decisions based on
evaluation results: to optimize institutions and
companies of all forms, to develop a clear and consistent
goal making and rate evaluation system of companies
and institutions activities. It is also important to ensure
an effective institutional supervision and management,
separating it from policy-making.
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National Audit Office of Lithuania: necessary coordinated actions for improving the activities of the companies and institutions operating in the public sector
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The audit provided an opportunity to draw conclusions
on the appropriateness of foreseeing the concept of
"medical service" in the Fundamentals of the Ukrainian
legislation on health care, to develop and approve the
procedure for determining the cost of medical services
and the procedure for reimbursement of such services
from the state and / or local budgets in order to allow free
the choice of patients with hemodialysis services.
The decision of the Accounting Chamber on the results
of examination of the audit findings at its meeting with
recommendations was forwarded to the Cabinet of
Ministers of Ukraine, the Ministry of Health of Ukraine,
the Ministry of Finance of Ukraine, as well as a number of
regional state administrations. In particular, the
Government proposed to submit for consideration by
the Verkhovna Rada of Ukraine a draft amendment to
the Fundamentals of the Ukrainian legislation on health
care, which would include the concept of "medical
service"; in order to allow the free choice of patients with
hemodialysis services, to develop and approve a
procedure for determining the cost of medical services
and the procedure for reimbursement of such services
from the state and / or local budgets.
The Accounting Chamber's information on the audit
results and the state of consideration of i ts
recommendations to the Ministry of Health of Ukraine
was considered at a meeting of the Verkhovna Rada of
Ukraine Committee on Health Care. As a result of the
consideration of the issue, the Committee sent relevant
proposals to the Cabinet of Ministers of Ukraine.
IMPORTANCE OF SAI COOPERATION
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PARTNERSHIPS OF SAI AND OTHER GROUPS OF INTEREST1IN REPUBLIC SRPSKA , BOSNIA AND HERZEGOVINA
Bojan Ćurić PhD
We had the opportunity at the seminar which was held
in October 5-6. 2017, in Riga, in the framework of the
first workshop, to discuss the way of definition of
cooperation between the SAI and various groups of
interest and the importance that this cooperation can
have in achieving general efficiency work which will in
the ultimate instance lead to positive results. That’s
why, it is our personal opinion that the SAI and other
bodies or institutions need to cooperate and exchange
experiences in order to increase the efficiency of work,
because it has proved long ago in practice that the lack
of traditional separation of the functions of various
authorities. Public audit is just a part of the system
and a strong link is needed, synergy between public
audit and other bodies so that the final effects of the
work are positive.
Generally listing, each SAI should establish a strong
link with
1. The Assembly,
2. The Government,
3. The Prosecution,
4. Internal audit,
5. Civil society,
6. Media,
7. Academic community, and what is it in Republic
Srpska, Bosnia and Herzegovina, we will see through
some of the following conclusions.
1. A link between the SAI and the Assembly The
current practice of the Assembly and the relevant
Audit Committee point to the worrying tendencies of
superficial relationship according to the findings SAI of
Republic Srpska, Bosnia and Herzegovina and that
they miss the opportunity to be based on the objective
and solid evidence of the work of budget and
extrabudgetary funds on the same to preform
pressuree. The Parliamentary Audit Committee
routinely adopts the recommendations from the SAI of
RS reports and is often not included in the discussion
on the key findings of the SAI of Republic Srpska,
Bosnia and Herzegovina with the responsible
representatives of audit entities that, together with the
failure to submit additional recommendations,
reflects the lack of capacity of this Committee. In this
regard, it is necessary to strengthen the activities of
the Audit Committee and the greater involvement of
the members of the Audit Committee.
2. A link between the SAI and the Government A good
relationship between the SAI and the government is
the basis for a quality audit process, as the
government helps the SAI in carrying out the audit
process, providing the necessary explanations and
providing requested documents. Likewise, the SAI can
assist the government in its day-to-day work, referring
to the current legislation regulation and its proper use.
The fact is that both the SAI and the government will
hawe more benefit if there is a spirit of positive
cooperation, and especially when the SAI delivers a
draft of its report to the management of the audited
subject, or when it requests the government's consent
to the facts presented.
1The Audit Office of Republika Srpska is one of the two sub-national
entity-level audit offices in Bosnia and Herzegovina with a mandate
to perform audits over public sector institutions of Republika Srpska
entity, including municipalities, while the Audit Office of Bosnia and
Herzegovina is in charge of performing state (top) level institutions
and INTOSAI and EUROSAI member.
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3. A link between the SAI and the Prosecutors Office
should be at an enviable level and according to the
author’s opinion is crucial for further action on the
results of the audit work. However, this cooperation in
Republic Srpska, Bosnia and Herzegovina is not an
example of the urgently needed timely exchange of
information and coordinated joint activities of these
institutions. The reasons are primarily due to the
absence of criminal responsibility came out from
audit reports and complete and timely information on
the actions taken by the prosecution on the basis of
the negative findings of the SAI Republic Srpska,
Bosnia and Herzegovina which are submitted to the
prosecution. In addition, the public is not sufficiently
familiar with the activities undertaken by the
prosecution on the findings of the SAI Republic
Srpska, Bosnia and Herzegovina, since these issues
are not in the focus of prosecutors during public
events. The methodology which is applied by the SAI
Republic Srpska, Bosnia and Herzegovina with
negative opinion mark significant material deviations
in the financial audit,ie essential non-compliance with
regulations in case of compliance audit. A negative
opinion does not automatically mean that a criminal
offense has been committed, while using this
methodology it is possible that the criminal offense is
hidden by the audited subject’s,who received the
opinion with a spare opinion. Unlike the countries in
the region (the Republic of Serbia and the Republic of
Montenegro), the SAI Republic Srpska, Bosnia and
Herzegovina does not have a legal obligation to file
criminal charges, but it submits negative audit reports
to the Prosecution for further action. Unofficially, the
prosecutors think that the audit reports are extensive
and that their work would be easier if the SAI Republic
Srpska, Bosnia and Herzegovina at the end of the
report clearly identifies facts that indicate a serious
violation of the law. In other words, for the prosecution,
the SAI Republic Srpska, Bosnia and Herzegovina
reports in the current form are not adequate for
analytical processing and slow down their work, while
for the SAI Republic Srpska, Bosnia and Herzegovina
they are at a very high level of expert processing and
represent good evidence. About that, it is necessary to
seek solutions for effective and efficient joint
activities,respectively to define a special agreement
for cooperation, guided by the experiences of
developed countries. For example, the countries of the
European Union (the Czech Republic and the Republic
of Bulgaria) have requested additional mechanisms
for networking activities of institutions in order to
more effectively combat against corruption, and
special agreements have been concluded to define
binding treaties between the SAI and the prosecution.
The experience of these countries shows that in
accordance with these agreements, auditors engage
as consultants in investigations and to organize
consultative meetings on investigations (the auditor
and the prosecutor) and annual meetings on which the
results of the cooperation are analyzed. For example,
the SAI of Bulgaria announces the prosecution in
writing form about the criminal offenses during the
audit activities, as well as the risk areas for corruption.
On the other hand, the prosecution informs the SAI of
the activities carried out in relation to information
provided to them, which are the result of the
investigation, evidence of illegal activities by
organizations and individuals from the scope of work
of the audit, risk areas and areas for corruption.
4. Link between the SAI and the Internal audit of the
SAI Republic Srpska, Bosnia and Herzegovina in the
audit process always review first the internal audit
reports and if it determines that it has worked
effectively and efficiently,it will use these materials as
the basis for its control and audit, ie it will treat them as
pre-audit documents and base them on their own
further work. Generally observed, cooperation
between the SAI and the internal audit can be viewed
in avoiding duplication of audit jobs in the same place
at the same time, in order to institutions inform each
other about the observed weaknesses in control, in
order to provide mutual reporting on audit findings,
conduct joint training, and provided cooperation for
any other questions. Regarding the mentioned
questions, the SAI Republic Srpska, Bosnia and
Herzegovina signed an agreement on professional
cooperation with the Central Unit for Harmonization of
Financial Management and Control and Internal Audit
at the Ministry of Finance of Republic Srpska, Bosnia
and Herzegovina, which is expressed willingness for
promoting professional cooperation.
5. Link between the SAI and the civil society So far,
there has been no significant contribution to the work
of the SAI Republic Srpska, Bosnia and Herzegovina
by non-governmental organizations in Republic
Srpska, Bosnia and Herzegovina. However, they could
be a good ally of the SAI Republic Srpska, Bosnia and
Herzegovina to achieve the same task, as they can use
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findings and recommendations to preform additional
pressure on audit entities
6. Link between the SAI and the media In the media,by
the minister,the representatives of the executive and
international organizations,often they can hear
copliments on the account SAI Republic Srpska,
Bosnia and Herzegovina and the quality of its work.
The SAI Republic Srpska, Bosnia and Herzegovina
does not have its own executive/enforcement rights in
relation to audit entities, so its position in the public
finance control system to a large extent depends not
only on the quality, the unquestionability and
persuasiveness of its findings and recommendations,
but also on the willingness of the executive to
implement and toncarry it intonacrion. Therefore, the
public is the strongest weapon of the SAI Republic
Srpska, Bosnia and Herzegovina and, with
parliamentary pressure, is the basic tool for achieving
changes in the way the entities of the audit work. Each
SAI must be aware that the perception of its work and
the audit report for many begin and end in the media -
through articles in print media, tv and radio coverage,
and content on the internet portals. Audit reports are
often written in a very specific style, with the use of
professional terms, and it is necessary for the SAI to
pay attention to the way in which the media report on
its work, while respecting the principle of freedom of
the press and media independence. It is necessary for
the SAI to have access to the media in order to be able
to communicate in relation to the most important
allegations from the report, according to its own
interpretation of the data. This can be implemented by
publishing special press releases in which, by the
accessible style and simple language of the SAI
Republic Srpska, Bosnia and Herzegovina itself, point
out the main findings and the most important
recommendations.
7. Link between the SAI and the academic
community In order to achieve the most efficient and
effective implementation of positive legal regulations
and relevant international professional standards and
regulations, promoting and improving the auditing
profession and practice, the SAI RS signed an
agreement on professional cooperation with the
Faculty of Economics and the Faculty of Law of the
University in Banja Luka, which is a assumption for the
professional training of auditor’s as well as teaching
staff and students at these two public higher
education institutions. Among the predicted forms of
professional cooperation, among others, there is an
individual or joint organization of scientific and
professional meetings, seminars, expert panels, round
tables, workshops, etc.
Finally, it can be concluded that it’s absolutley
necessary an improvement and institutional definition
of cooperation between the SAI and the above-
mentioned institutions and organizations, and
e s p e c i a l l y w i t h t h e s t a t e a u t h o r i t i e s a n d
administrative bodies in whose jurisdiction and
activities are related to controlling the regularity of the
use of public funds, such as: State Prosecutor, Audit
Committee, Ministry of Finance, Internal Audit, etc.
Throguh the conclusion of the cooperation
agreement, the exchange of information, data and
information from the competencies of these
institutions it would be more precise and thus
overcome technical and formal obstacles to
improving the efficiency of work in the prevention and
suppression of all forms of abuse of the financial
system. On the other hand,observing the good
relationship between the SAI and other institutions is a
good idea, but the fact is that there is always a problem
in the relationship between the establishing and
maintaining of independence and what the subjects of
the audit expect, their confidence in the audit work and
the audit report. Beside that, the environment in which
these relationships are develop especially in Republic
Srpska, Bosnia and Herzegovina but also in other
countries in the region is dynamic, so the auditor must
be prepared for the fact that he will always meet with
n e w c i r c u m s t a n c e s a n d c h a l l e n g e s .
Municipality Audit
E U R S A IT A S K F O R C E